How To Deal With Chargebacks
Nowadays, with constantly increasing number of online transactions and better consumer awareness (which is great!), it is important things are under control.
The cardholders are entitled to invoke a chargeback procedure. This may be carried out in the event their merchant does not perform a contract for the items they have paid for or when their card has been used for a non-authorized payment. While this option is extremely convenient and safe for the cardholders, it is less fun for the merchants to deal with such a request.
Agreed, it is the issuer bank’s duty to take this up, on the other hand, it will be the merchant who will be charged for each procedure. Unless they have strong arguments that the chargeback shouldn’t have been initiated in the first place.
Prevention is better than cure
PayLane has already provided you with some juicy tips on how to prevent chargebacks so that you can reduce (or totally eliminate) their number.
As an additional hint, it is wise to familiarize yourself beforehand with the regulations set up by the financial institutions which process the transactions between you and your customers. Please note they may slightly differ one from another. Knowing the rules dictated by various financial institutions may prevent you from losing customers.
But what if this happens anyway
If, in spite of all your best efforts, you are to deal with a chargeback raised by an unhappy customer, no need to panic. You deliver products or services of high quality, you care about your customers and keep in touch with them. If this holds true, there is no reason for you to worry. Just keep doing what you are doing and document all your transactions and communication. Now, let’s deal with this nasty chargeback.
Essentially, the most common reasons of invoking chargebacks are when a customer does not receive the product they paid for, does not recognize the transaction on their statements or isn’t satisfied with the product or service. Make sure you promptly respond to your customer’s doubts. Call them to see if everything is okay and why they seem unhappy with the purchased product.
Provided you agree with the customer and they do deserve their money back, how about you offer them a refund which means that you will return the whole or part of the transaction amount if the customer withdraws the chargeback request. This way you will not be paying the chargeback fee.
Always show openness to dialogue. It will leave room for negotiations and may encourage people to come to you in the first instance rather than run and complain to their bank.
So how does the whole process look like?
When a cardholder initiates the chargeback procedure, you will be informed about the initiation of the process and you will be asked to provide full documentation regarding the transaction.
The good news is that if you have strong arguments that the transaction was successful, the product or service was of excellent quality and delivered on time, the chargeback will be turned down by the bank and you will receive the blocked funds. You will usually have a certain deadline to deliver the documents and your argumentation. Make sure you take care of this properly and show to the bank that you are a serious entrepreneur. Losing opportunity to deliver the documents within the given time frames will cost you.
Show them what you got
Again, if settling the dispute with the unhappy customer is out of the question, then here’s what you will need to provide your bank with, in case the customer complains about:
1. not receiving the product/service
- delivery receipt
- copy of the product/service description together with date and delivery method
- information whether the customer has contacted you to resolve the issue (correspondence with the customer)
2. the product/service not being compatible with the description (or being damaged)
- copy of the product/service description together with date and delivery method
- document stating the customer received the product/service and confirmed it wasn’t damaged
- your own statement (and documents, if available) that the customer hasn’t returned the product or that the product/service has been fixed or replaced
- information whether the customer has contacted you to resolve the issue (correspondence with the customer)
3. the same product/service being charged multiple times
- documents stating that the payments were done for different products/services
4. the refund not being made
- confirmation the refund has been made
- your own statement (and documents, if available) that the customer hasn’t returned the product or that you haven’t agreed for a refund or that you have informed the customer about the conditions of purchase at the time of purchase
5. fraudulent transaction
- documents with more information available about the transaction than in the regular customer’s statement, such as: detailed description of the product/service, personal details of the cardholder, unique IP address of the originating computer and the mailing address.
In fact, there are two possible chargeback dispute resolutions. Either the chargeback will be accepted and the customer gets the refund (in the event the bank decides you should refund your unhappy customer or when you do not deliver the documents on time) or the chargeback will be rejected (the bank decides it is unfounded).
Special thanks for co-writing this post to Patrycja Bronk – fan of new technologies. Patrycja loves writing about things that inspire her. Passionate about project management and coaching. Brings the best out of the people from her entourage. Crazy traveler.
